Articles

Trust the Process: How FP&A Can Strike a Balance Between Too Much and Just Enough

By Bryan Lapidus, FP&A

Published: 5/16/2018

“My CEO does not like too much process, but he likes the benefit of process.”

Nick Tressler, VP of FP&A at small public bio-technology company, was explaining the importance of getting the processes right as his company switched EPM vendors. This topic became more important for Tressler as his company grew in size and complexity. He continued by saying that at small companies, nimbleness and adaptability is a strength, but as companies mature, stability and sustainability become more important. Recently, his company was bought by a large pharmaceutical company and so he expects additional layers of process in his daily activities.

This brings into focus the healthy tension of process; how do you strike the right balance to get the benefits without strangling agility?

Let’s step back and look how FP&A can think about process overall.

What is your function in the company? Some groups are all about control—think of the accounting organization, also known as controllership, or internal audit—because of the importance of sound financial controls (backed by legal and regulatory compliance). Through FP&A’s performance management role, we may enforce controls on other groups, whether that is spending, operations, or strategy measurement. We may also be bound by investor or SEC reporting, having knowledge of sensitive company information.

What is your company’s industry? Processes may be incredibly tight in healthcare around protecting patient health information (PHI), financial services due to fiduciary responsibilities, or agriculture due to food safety. Consider the operating environment, key assets, and competitive advantage of your company.

What is the risk appetite in your company? This may be a function of company maturity, as Tressler indicated with a young biotech company, or company culture where the goal is to “run fast and break things.” Often, processes are put in place to remedy errors or see stability as companies re-calibrate their risk appetite.

IN PRAISE OF PROCESS

In a world that strives for fewer rules, agile functions, and adaptability, “process” sometimes gets a bad name for inhibiting growth. There are times when process is both critical and helpful, and should be deployed to maximum effect:

Gain efficiencies in repetitive tasks. Establishing processes can speed work along and synchronize efforts, such as having the company submit forecast updates on the first day of the month. FP&A should look to automate repetitive tasks, especially around data aggregation and standard reporting.

Best practices and effectiveness. Many processes reflect years of learning, errors, and the wisdom of others. For example, a former client of mine created elaborate process because key parts of the organization did not have input in their program development process leading to confusion, rework and frustration.

Control matters. FP&A both operates within constraints on its own processes, as well as acting like the control for other parts of the company. We play a role in protecting capital by through our management reporting, capital allocation, and supporting business partners.

DEATH BY PROCESS

Good intentions may go too far, and organizations may inhibit progress with overly restrictive processes. You will if your team has become “slaves to the process” if the process matters more than the outcome. Here are some signs to watch out for:

The Catch-22 or lack of process effectiveness. You must follow the process to do your job but following the process won’t get the job done. Employees are reviewed based on adherence to the process rather than the outcome of the process.

“Cops and Robbers.” You spend too much time enforcing the process versus doing productive work. This is evidenced by the surplus of people or time spent who monitoring the process compliance, or an adversarial relationship in executing the work.

Changes/no longer efficient. New technology or connecting upstream or downstream processes may make the current process outdated.

Process saps the creativity of the team. The process may be slow, require many approvals or too much information, then not use all the inputs that people are required to gather.

STRIKING THE RIGHT BALANCE

Here are a few thoughts how to enjoy the benefit of process without being bound and inhibited:

What is the business outcome that this process supports? Remember that process exists for a reason, not for its own sake!

Why does the process exist? What were the originating factors that led to the creation of this process, and are they still relevant?

Can I measure the effectiveness and efficiency of this process? Look for trending data to show when a process becomes onerous. Try to align process metrics with overall business outcome metrics

Consider a process audit. Inventory the processes that apply to your teams, asking the above questions to determine should be kept, enhanced, discarded, or automated.

Changing needs and opportunities both give rise to the creation of process as well as the opportunity to streamline or remove processes. FP&A should ensure their own processes and those of their business partners have intentionality and not just relics of past circumstances.

Other groups thrive on lack of controls in order to allow their creative juices to flow and work across business silos.

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